Rabies Scandal Rocks China's Vaccine Industry

Rabies Scandal Rocks China's Vaccine Industry

Beijing, 22 July 2018: A brewing scandal over violations of drug production regulations by one of China's largest vaccine manufacturers, which has sparked nationwide outrage, could pose serious challenges for a domestic industry that has seen rapid growth in recent years but experienced a series of scandals.

The growing concerns over the safety of the whole domestic vaccine industry, triggered by the Changchun Changsheng incidents, could also turn Chinese consumers to foreign alternatives and prompt tougher regulations. These factors are likely to rein in the skyrocketing profits of domestic companies, experts noted.

The outrage started when the China Food and Drug Administration (CFDA) released a statement on July 15, saying an investigation into Changchun Changsheng Life Sciences found that the company has seriously violated drug production quality management regulations, including forging production records on rabie vanccine. The probe was launched after the CFDA received complaints.

The situation further escalated after the CFDA on July 19 announced penalties on Changsheng resulted from another separate probe into the company launched in November 2017. The company was found selling substandard vaccines back that time.

Finger-pointing continues regarding the Changsheng incident, with some blaming authorities for a lack of proper oversight and others pointing to dishonest companies that only seek profits and ignore the safety of millions of patients across the country.

But experts noted that the key root behind the frequent incident of problematic vaccine is that punishment for companies that violate regulations is too light, prompting some companies to take risks.

"If regulation is not tough, companies will always seek (to maximize) profits. Unless there's a major problem, companies will cut production costs as much as they can," a Beijing-based expert told the Global Times, speaking on condition of anonymity.

"If this kind of life and death [violation] could result in the death penalty, companies wouldn't dare do it."

In the case of Changsheng for violations of selling substandard products in October 2017, the company was only fined about 2.58 million yuan ($381,323) in addition to 858,840 yuan being confiscated, according to a Changsheng filing to the Shenzhen Stock Exchange on Thursday.

"The public's distrust of domestic drug companies has only intensified and after this incident, some might actually turn to foreign vaccines instead of domestic ones," Li Tianquan, co-founder of domestic healthcare big data platform yaozh.com told the Global Times on Sunday. "Domestic companies will mostly likely face some of the toughest regulations."

The Chinese vaccine market has grown rapidly in recent years on the strength of increased government support for healthcare and rising parental attention to having children vaccinated, Li noted. As a result, domestic companies have prospered.

Vaccine companies are some of the most profitable enterprises in China, with 52 vaccine-focused companies listed on the A-share market averaging a gross margin of 50 percent in the first quarter of 2018, according to a report in the Beijing News.

Changsheng's gross margin was the highest, reaching 91.59 percent.

"With all of these producers, it is hard to imagine that they will grow as fast as they have," Li said, while stressing that "the overall environment is good" for the domestic industry's long-term growth. "This goes in the right direction toward better regulations and better-quality vaccines."Global Times